U.S. Bankruptcy Judge Thomas Bennett, shown during an April 9, 2012, interview, has handed Jefferson County sewer a rebuff. (The Birmingham News / Michelle Campbell)

BIRMINGHAM, Alabama -- Cash-strapped Jefferson County cannot use sewer system revenues for nonoperating expenses such as estimated legal fees and expenses, a bankruptcy judge wrote this morning.

U.S. Bankruptcy Judge Thomas Bennett said in a 43 page memorandum opinion that sewer system operating expenses as determined under the contract between the county and sewer creditors "do not include (1) a reserve for depreciation, amortization, or future expenditures or (2) an estimate for professional fees and expenses."

Bennett said he plans to enter a separate order incorporating his ruling.

The decision appears to be a blow for the county who had argued that reserving money for attorney fees and capital expenditures -- a fund for big repairs and new projects -- is allowed by both the legal terms of the bond agreements and the judge's rulings since the bankruptcy filing.

The decision means the county must now find cash for more than $1 million a month in bankruptcy legal fees from an area other than sewer revenues. The county's ailing general fund is expected to be nearly depleted by Sept. 30, the end of the fiscal year.

County officials said the ruling means the system will continue to be maintained.

"Among other things, we note that the court's ruling maintains the status quo . . . the county can continue to operate the system, and the county's sewer professionals have the resources that need to continue providing vital services to the community," Commission President David Carrington said in a prepared statement.

The trustee for the creditors had asked in a filing earlier this year for a declaratory judgment stating that net sewer revenues belong to the bondholders. Creditors also asked that fees paid to county attorneys be deducted from the county's end, not the creditors.

Efforts to reach the creditors' lawyers for comment were unsuccessful.

Bennett wrote in his memorandum opinion today that the money remaining in the sewer revenue account following payment of operating expenses that were incurred in the current or prior months are to be remitted to creditors "without withholding of any monies for depreciation, amortization, reserves, or estimated expenditures that are the subject of this litigation."

Jefferson County filed for the largest Chapter 9 municipal bankruptcy in U.S. history in November, citing $3.14 billion owed to bondholders who lent money to expand and repair the decrepit sewer system starting in 1997.